SEC Filing – IOVANCE Biotherapeutics, Inc.

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U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 001-36860

IOVANCE BIOTHERAPEUTICS, INC.

(Exact name of issuer as specified in its charter)


Delaware	75-3254381
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification number)

999 Skyway Road, Suite 150, San Carlos, CA 94070

(Address of principal executive offices and zip code)

(650) 260-7120

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.000041666 per value		IOVA		The Nasdaq Stock Market, LLC

At October 26, 2021, the issuer had 156,899,118 shares of common stock, par value $0.000041666 per share, outstanding.

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IOVANCE BIOTHERAPEUTICS, INC.

FORM 10-Q

For the Quarter Ended September 30, 2021

Table of Contents


		Page
PART I FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosure	85
Item 5.	Other Information	85
Item 6.	Exhibits	86
SIGNATURES		87

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PART I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(unaudited; in thousands, except share and per share information)


	September 30,		December 31,
	2021		2020

ASSETS

Current Assets
Cash and cash equivalents	$	58,590	$	67,329
Short-term investments		517,859		562,108
Prepaid expenses and other assets		6,577		6,663
Total Current Assets		583,026		636,100

Property and equipment, net		88,034		59,159
Operating lease right-of-use assets		72,423		54,756
Long-term investments		78,247		—
Restricted cash		6,084		5,525
Long-term assets		1,011		12,918
Total Assets	$	828,825	$	768,458

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable	$	12,181	$	13,513
Accrued expenses		45,969		35,074
Operating lease liabilities - current		6,616		6,284
Total Current Liabilities		64,766		54,871

Non-Current Liabilities
Operating lease liabilities – noncurrent		64,729		45,375
Long-term note payable		1,000		—
Other liabilities		—		11,714
Total Non-Current Liabilities		65,729		57,089
Total Liabilities		130,495		111,960

Commitments and contingencies

Stockholders’ Equity
Series A Convertible Preferred stock, $0.001 par value; 17,000 shares designated, 194 shares issued and outstanding as of September 30, 2021 and December 31, 2020		—		—
Series B Convertible Preferred stock, $0.001 par value; 11,500,000 shares designated, 2,842,158 and 3,581,119 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		3		4
Common stock, $0.000041666 par value; 300,000,000 shares authorized, 156,702,653 and 146,874,917 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		7		6
Accumulated other comprehensive income		(5)		19
Additional paid-in capital		1,771,440		1,486,662
Accumulated deficit		(1,073,115)		(830,193)
Total Stockholders’ Equity		698,330		656,498
Total Liabilities and Stockholders’ Equity	$	828,825	$	768,458

The accompanying notes are an integral part of these condensed consolidated financial statements.

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IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Operations

(unaudited; in thousands, except per share information)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

Costs and expenses
Research and development expenses	$	65,355	$	43,050	$	183,423	$	149,276
General and administrative expenses		20,887		15,916		59,815		44,127
Total costs and expenses		86,242		58,966		243,238		193,403

Loss from operations		(86,242)		(58,966)		(243,238)		(193,403)
Other income
Interest income, net		120		395		316		2,219
Net Loss	$	(86,122)	$	(58,571)	$	(242,922)	$	(191,184)
Net Loss Per Share of Common Stock, Basic and Diluted	$	(0.55)	$	(0.40)	$	(1.60)	$	(1.41)
Weighted Average Shares of Common Stock Outstanding, Basic and Diluted		155,508		146,492		152,221		135,457

The accompanying notes are an integral part of these condensed consolidated financial statements.

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IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited; in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

Net Loss	$	(86,122)	$	(58,571)	$	(242,922)	$	(191,184)
Other comprehensive loss:
Unrealized loss on short-term investments		(38)		(162)		(24)		(65)
Comprehensive Loss	$	(86,160)	$	(58,733)	$	(242,946)	$	(191,249)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended September 30, 2021 and 2020

(unaudited; in thousands, except share information)


	Series A			Series B Convertible						Additional		Accumulated				Total
	Preferred Stock			Preferred Stock			Common Stock			Paid-In		Comprehensive		Accumulated		Stockholder
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Income (Loss)		Deficit		Equity
Balance - June 30, 2021	194	$	—	2,842,158	$	3	154,799,721	$	7	$	1,731,363	$	33	$	(986,993)	$	744,413
Stock-based compensation expense	—		—	—		—	—		—		19,306		—		—		19,306
Common stock issued upon exercise of stock options	—		—	—		—	1,902,932		—		20,771		—		—		20,771
Unrealized loss on short-term investments	—		—	—		—	—		—		—		(38)		—		(38)
Net loss	—		—	—		—	—		—		—		—		(86,122)		(86,122)
Balance - September 30, 2021	194	$	—	2,842,158	$	3	156,702,653	$	7	$	1,771,440	$	(5)	$	(1,073,115)	$	698,330

Balance - June 30, 2020	194	$	—	3,581,119	$	4	146,434,810	$	6	$	1,461,207	$	317	$	(703,225)	$	758,309
Stock-based compensation expense	—		—	—		—	—		—		10,706		—		—		10,706
Common stock issued upon exercise of stock options	—		—	—		—	146,814		—		1,516		—		—		1,516
Unrealized loss on short-term investments	—		—	—		—	—		—		—		(162)		—		(162)
Common stock sold in public offering, net of offering costs	—		—	—		—	—		—		43		—		—		43
Net loss	—		—	—		—	—		—		—		—		(58,571)		(58,571)
Balance - September 30, 2020	194	$	—	3,581,119	$	4	146,581,624	$	6	$	1,473,472	$	155	$	(761,796)	$	711,841

The accompanying notes are an integral part of these condensed consolidated financial statements.

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IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

For the Nine Months Ended September 30, 2021 and 2020

(unaudited; in thousands, except share information)



	Series A			Series B Convertible						Additional		Accumulated				Total
	Preferred Stock			Preferred Stock			Common Stock			Paid-In		Comprehensive		Accumulated		Stockholder
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Income (Loss)		Deficit		Equity
Balance - December 31, 2020	194	$	—	3,581,119	$	4	146,874,917	$	6	$	1,486,662	$	19	$	(830,193)	$	656,498
Stock-based compensation expense	—		—	—		—	—		—		50,661		—		—		50,661
Common stock issued upon purchase of employee stock purchase plan	—		—	—		—	55,315		—		970		—		—		970
Common stock issued upon exercise of stock options	—		—	—		—	2,559,361		—		29,992		—		—		29,992
Common stock sold in public offering, net of offering costs	—		—	—		—	6,474,099		1		203,154		—		—		203,155
Common stock issued from preferred stock conversion	—		—	(738,961)		(1)	738,961		—		1		—		—		—
Unrealized loss on short-term investments	—		—	—		—	—		—		—		(24)		—		(24)
Net loss	—		—	—		—	—		—		—		—		(242,922)		(242,922)
Balance - September 30, 2021	194	$	—	2,842,158	$	3	156,702,653	$	7	$	1,771,440	$	(5)	$	(1,073,115)	$	698,330

Balance - December 31, 2019	194	$	—	3,581,119	$	4	126,411,808	$	5	$	869,354	$	220	$	(570,612)	$	298,971
Stock-based compensation expense	—		—	—		—	—		—		30,655		—		—		30,655
Vesting of restricted shares issued for services	—		—	—		—	13,449		—		—		—		—		—
Tax payments related to shares withheld for vested restricted stock units	—		—	—		—	—		—		(283)		—		—		(283)
Common stock issued upon exercise of stock options	—		—	—		—	680,561		—		6,704		—		—		6,704
Unrealized loss on short-term investments	—		—	—		—	—		—		—		(65)		—		(65)
Common stock sold in public offering, net of offering costs	—		—	—		—	19,475,806		1		567,042		—		—		567,043
Net loss	—		—	—		—	—		—		—		—		(191,184)		(191,184)
Balance - September 30, 2020	194	$	—	3,581,119	$	4	146,581,624	$	6	$	1,473,472	$	155	$	(761,796)	$	711,841

The accompanying notes are an integral part of these condensed consolidated financial statements.

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IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited; in thousands)


	Nine Months Ended
	September 30,
	2021		2020
Cash Flows from Operating Activities
Net loss	$	(242,922)	$	(191,184)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		50,661		30,655
Non-cash lease expense		7,630		4,999
Accretion (amortization) of discounts and premiums on investments		5,177		359
Depreciation and amortization		1,766		819

Changes in assets and liabilities:
Prepaid expenses, other assets, and long-term assets		11,993		66
Right-of-use assets		(25,297)		(4,986)
Operating lease liabilities		19,686		(593)
Accounts payable		(740)		9,168
Accrued expenses and other liabilities		(2,046)		8,255
Net cash used in operating activities		(174,092)		(142,442)

Cash Flows from Investing Activities
Maturities of investments		544,454		358,493
Purchase of investments		(583,654)		(711,643)
Purchase of property and equipment		(30,006)		(23,456)
Net cash used in investing activities		(69,206)		(376,606)

Cash Flows from Financing Activities
Tax payments related to shares withheld for vested restricted stock units		—		(283)
Proceeds from the issuance of common stock upon exercise of options and employee stock purchase plan		30,962		6,704
Proceeds from the issuance of common stock, net		203,156		567,043
Proceeds from the issuance of debt		1,000		—
Net cash provided in financing activities		235,118		573,464
Net increase in cash, cash equivalents, and restricted cash		(8,180)		54,416
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period		72,854		19,419
Cash, Cash Equivalents, and Restricted Cash, End of Period	$	64,674	$	73,835

Supplemental disclosure of non-cash operating, investing and financing activities:
Net unrealized loss on short-term investments	$	(24)	$	(65)
Acquisitions of property and equipment included in accounts payable and accrued expense		(635)		(8,061)
Conversion of convertible preferred stock to common stock		(1)		—
Lease liabilities arising from obtaining right-of-use asset from new leases		17,275		4,667
Lease liabilities arising from obtaining right-of-use asset from lease modifications		7,800		22

The accompanying notes are an integral part of these condensed consolidated financial statements.

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IOVANCE BIOTHERAPEUTICS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1. GENERAL ORGANIZATION AND BUSINESS

Iovance Biotherapeutics, Inc. (the “Company”, “we”, “us” or “our”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of cell therapies as novel cancer immunotherapy products designed to harness the power of a patient’s own immune system to eradicate cancer cells. Tumor infiltrating lymphocyte (“TIL”) therapy is an autologous cell therapy platform technology that was originally developed by the National Cancer Institute (“NCI”), which conducted initial clinical trials in diseases such as metastatic melanoma and cervical cancer. The Company has developed a new, shorter manufacturing process for TIL therapy known as Generation 2 (“Gen 2”), which yields a cryopreserved TIL product. This proprietary and scalable manufacturing method is being further investigated in multiple indications. The Company’s lead product candidates include lifileucel for metastatic melanoma and metastatic cervical cancer. Lifileucel for metastatic cervical cancer was formerly known as LN-145. In addition to metastatic melanoma and metastatic cervical cancer, the Company is investigating the effectiveness and safety of TIL therapy and peripheral blood lymphocyte therapy for the treatment of squamous cell carcinoma of the head and neck, non-small cell lung cancer, and chronic lymphocytic leukemia through its sponsored trials, as well as in other oncology indications through collaborations. On June 1, 2017, the Company reincorporated from a Nevada corporation to a Delaware corporation.

Basis of Presentation of Unaudited Condensed Consolidated Financial Information

The accompanying unaudited condensed consolidated financial statements of the Company for the three and nine months ended September 30, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for audited financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company's financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2020, was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2021. These interim financial statements should be read in conjunction with that report.

Liquidity

The Company is currently engaged in the development of therapeutics to fight cancer, specifically solid tumors. The Company currently does not have any commercial products and has not yet generated any revenues and does not anticipate that it will generate any significant revenues from the sale or licensing of any of its product candidates during the 12 months from the date these financial statements are issued. The Company has incurred a net loss of $242.9 million for the nine months ended September 30, 2021 and used $174.1 million of cash in its operating activities during the nine months ended September 30, 2021. For the nine months ended September 30, 2021, the Company received net proceeds of approximately $203.2 million from the “at the market” offering program the Company has in place with Jefferies LLC, acting as sales agent. As of September 30, 2021, the Company had $660.8 million in cash, cash equivalents, investments, and restricted cash ($58.6 million of cash and cash equivalents, $517.9 million in short-term investments, $78.2 million in long-term investments, and $6.1 million in restricted cash).

The Company expects to continue its research and development activities, increase pre-commercial activities, and complete the construction of the tenant improvements for its Iovance Cell Therapy Center (the “iCTC”) as well as the new headquarters’ office in San Carlos, California, all of which will increase the amount of cash used during the remainder of 2021 and beyond. Specifically, the Company expects continued spending on its current and planned clinical trials, continued expansion of manufacturing activities, higher payroll expenses as the Company increases its professional and scientific staff and continuation of pre-commercial activities. Based on the funds the Company has available as of the date these financial statements are issued, the Company believes that it has sufficient capital to fund its anticipated operating expenses and capital expenditures as planned for at least the next twelve months from the date these financial statements are issued.

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Impact of COVID-19

In December 2019, a novel coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally. On January 30, 2020, the World Health Organization (“WHO”) declared COVID-19 a pandemic (the “COVID-19 Pandemic”). The Secretary of Health and Human Services declared a public health emergency on January 31, 2020, under section 319 of the Public Health Service Act (42 U.S.C. 247d), in response to the COVID-19 Pandemic. The full impact of the COVID-19 Pandemic is unknown and rapidly evolving. While the potential economic impact brought by and over the duration of the COVID-19 Pandemic may be difficult to assess or predict, the COVID-19 Pandemic has resulted in significant disruption of global financial markets, which could in the future negatively affect the Company's liquidity. In addition, a recession or market volatility resulting from the COVID-19 Pandemic could affect the Company’s business. Given the nature and type of the Company’s short-term investments in U.S. government securities, the Company does not believe the COVID-19 Pandemic has had or will have a material impact on the Company's current investment liquidity.

Concentrations of Risk

The Company is subject to credit risk from its portfolio of cash equivalents and investments. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. The Company does not believe it is exposed to any significant concentrations of credit risk from these financial instruments. The goals of its investment policy, in order of priority, are as follows: safety and preservation of principal, liquidity of investments sufficient to meet cash flow requirements of its business, and maximization of total return while maintaining safety and liquidity.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash, Cash Equivalents, and Investments

The Company’s cash and cash equivalents include short-term investments with original maturities of three months or less when purchased. The Company's investments are classified as “available-for-sale” and are presented at fair value as either a current or non-current asset based on the length of maturity from the reporting date. Unrealized gains and losses on available-for-sale securities are included in accumulated other comprehensive income. Impairment losses related to credit losses (if any) are included in an allowance for credit losses with an offsetting entry to net loss. No impairment losses related to credit losses were recognized for the three and nine months ended September 30, 2021 and 2020. The cost of debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in Interest income, net in the Condensed Consolidated Statements of Operations. Gains and losses on securities sold are recorded based on the specific identification method and are included in Interest income, net in the Condensed Consolidated Statements of Operations. The Company has not incurred any realized gains or losses from sales of securities to date. The Company’s investment policy limits investments to certain types of instruments such as certificates of deposit, money market instruments, obligations issued by the U.S. government and U.S. government agencies as well as corporate debt securities and commercial papers, and places restrictions on maturities and concentration by type and issuer, except for securities issued by the U.S. government.

Restricted Cash

The Company maintains a required minimum balance, currently $6.1 million in a segregated bank account in connection with three letters of credit, one for $5.45 million for the benefit of the landlord for its commercial manufacturing facility used as a security deposit for the lease (See Note 10 - Leases), the second one for $74,685 for the benefit of a utilities service provider, and the third one for $559,082 for the benefit of the landlord for the Company’s new headquarters lease. The total amount is classified as Restricted Cash on the Condensed Consolidated Balance Sheet. The first letter of credit originally expired on May 28, 2020, however, it automatically extends for additional one-year periods, without written agreement, to May 28 in each succeeding calendar year, through at least 60 days after the lease expiration date. Further, on the expiration of the seventh year of the lease, and each anniversary date thereafter, the letter of credit may be decreased by $1.0 million, with a minimum security deposit of $1.45 million maintained through the end of the lease term. The second letter of credit of $74,685 expired on March 9, 2021, however, it automatically extends, without written agreement, to the expiration date of December 1, 2022. The third letter of credit of $559,082 expires on February 1, 2032, however, it will be automatically extended, without written agreement, for one-year periods to February in each succeeding calendar year. As of September 30, 2021, and December 31, 2020, restricted cash consisted of $6.1 million and $5.5 million, respectively. This amount has been classified as a non-current asset on the Company’s Condensed Consolidated Balance Sheets.

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The following table provides a reconciliation of cash, cash equivalents, and restricted cash, reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):


	September 30,		September 30,
	2021		2020

Cash and cash equivalents	$	58,590	$	68,310
Restricted cash		6,084		5,525
Total cash, cash equivalents and restricted cash	$	64,674	$	73,835

Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period.

Diluted net loss per share is computed by dividing the net loss by the sum of the weighted average number of shares of common stock outstanding and the dilutive common stock equivalent shares outstanding during the period. The Company’s potentially dilutive common stock equivalent shares, which include incremental shares of common stock issuable upon (i) the exercise of outstanding stock options and warrants, (ii) purchases though the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), (iii) vesting of restricted stock units, and (iv) conversion of preferred stock, are only included in the calculation of diluted net loss per share when their effect is dilutive.

As of September 30, 2021 and 2020, the following outstanding common stock equivalents have been excluded from the calculation of net loss per share because their impact would be anti-dilutive:


	September 30,
	2021	2020
Stock options	12,537,858	12,768,881
Series A Convertible Preferred Stock*	97,000	97,000
Series B Convertible Preferred Stock*	2,842,158	3,581,119
2020 ESPP	36,263	—
Restricted stock units	1,160,300	—
	16,673,579	16,447,000

* on an as-converted basis

The effect of potentially dilutive securities would be reflected in diluted earnings per share of common stock by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company's common stock could result in a greater dilutive effect from potentially dilutive securities.

Fair Value Measurements

Under Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, fair value is defined as the price at which an asset could be exchanged, or a liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied.

Assets and liabilities recorded at fair value in the Company’s financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1–These are investments where values are based on unadjusted quoted prices for identical assets in an active market that the Company has the ability to access.

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Level 2–These are investments where values are based on quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets.

Level 3–These are financial instruments where values are derived from techniques in which one or more significant inputs are unobservable.

The Company’s financial instruments consist of cash, cash equivalents, short and long-term investments, and long-term notes payable, all of which are reported at their respective fair value on its Condensed Consolidated Balance Sheets.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s financial instruments consist of Level 1 and Level 2 assets. Where quoted prices are available in an active market, securities are classified as Level 1.

When quoted market prices are not available for a specific security, the Company estimates the fair value by using quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third-party data providers, including but not limited to, benchmark yields, interest rate curves, reported trades, broker/dealer quotes, and market reference data. Level 2 assets consist of commercial paper and government agency securities. Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for the asset.

As of September 30, 2021 and December 31, 2020, the fair value of the Company’s financial assets, which consist of cash equivalents and short and long-term investments classified as available-for-sale securities, that were measured on a recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations (in thousands):


	Assets at Fair Value as of September 30, 2021
	Level 1		Level 2		Level 3		Total
U.S. treasury securities	$	238,238	$	—	$	—	$	238,238
U.S. government agency securities		—		12,233		—		12,233
Corporate securities		—		43,308		—		43,308
Commercial paper		—		312,325		—		312,325
Money market funds		32,577		—		—		32,577
Total	$	270,815	$	367,866	$	—	$	638,681


	Assets at Fair Value as of December 31, 2020
	Level 1		Level 2		Level 3		Total
US treasury securities	$	470,109	$	—	$	—	$	470,109
US government agency securities		91,999		—		—		91,999
Money market funds		49,720		—		—		49,720
Total	$	611,828	$	—	$	—	$	611,828

The available-for-sale securities in the Company’s Condensed Consolidated Balance Sheets are as follows (in thousands):



	September 30,		December 31,
	2021		2020

Cash equivalents	$	42,575	$	49,720
Short-term investments		517,859		562,108
Long-term investments		78,247		—
Cash equivalents and investments total	$	638,681	$	611,828

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the assumptions made in valuing stock instruments issued for services and used in measuring operating right-of-use assets and operating lease liabilities, accounting for potential liabilities, capitalization of internal-use software development costs, and the valuation allowance associated with the Company’s deferred tax assets.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Iovance Biotherapeutics, Inc. and its wholly-owned subsidiaries, Iovance Biotherapeutics Manufacturing LLC, Iovance Biotherapeutics GmbH, and Iovance Biotherapeutics B.V. All intercompany accounts and transactions have been eliminated. The U.S. dollar is the functional currency for all the Company's consolidated operations.

Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law, and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act, among other things, includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act. The tax relief measures for business entities include a five-year net operating loss carrybacks, suspension of annual deduction limitation of 80% taxable income from net operating losses generated in a tax year beginning after December 31, 2017, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and technical correction to allow accelerated deductions for qualified improvement property. The Company evaluated the impact of the CARES Act and determined the impact is immaterial for the three and nine months ended September 30, 2021.

Leases

The Company determines if an arrangement includes a lease at inception. Operating leases are included in its Condensed Consolidated Balance Sheet as Operating lease right-of-use assets and Operating lease liabilities as of September 30, 2021 and December 31, 2020. Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the net present value of lease payments, the Company uses an estimated incremental borrowing rate that is applicable to the Company based on the information available at the later of the lease commencement date or the date of adoption of Accounting Standard Update (“ASU”) No. 2016-02 and ASU No. 2018-10, Leases (together “Topic 842”). The operating lease right-of-use assets also include any lease payments made less lease incentives. The Company’s leases may include options to extend or terminate the lease, which is considered in the lease term when it is reasonably certain that the Company will exercise any such options. Lease expense is recognized on a straight-line basis over the expected lease term. The Company has elected not to apply the recognition requirements of Topic 842 for short-term leases.

For lease agreements entered into after the adoption of Topic 842 that include lease and non-lease components, such components are generally accounted for separately.

Stock-Based Compensation

The Company periodically grants stock options to employees as compensation for services rendered. The Company accounts for all stock-based payment awards made to employees, including the employee stock purchase plans in accordance with the authoritative guidance provided by the Financial Accounting Standards Board (“FASB”) where the value of the award is measured on the date of grant and recognized over the vesting period. In accordance with ASU No. 2018-07, Compensation-Stock Compensation (“Topic 718”), the Company accounts for stock option grants to non-employees in a similar manner as stock option grants to employees except for the term used in the grant date fair value, therefore no longer requiring a re-measurement at the then-current fair values at each reporting date until the shares underlying the options have vested. The non-employee awards that contain a performance condition that affects the quantity or other terms of the award are measured based on the outcome that is probable.

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The fair value of the Company's common stock option grants is estimated using a Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected term of the common stock options, and future dividends. The stock-based compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

The Company issues restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) from time to time as part of its share-based compensation programs. The Company measures the compensation cost with respect to RSUs and RSAs issued to employees based upon the estimated fair value of the equity instruments at the date of the grant, which is recognized as an expense over the period during which an employee is required to provide services in exchange for the awards. The fair value of RSUs and RSAs is based on the closing price of the Company’s common stock on the grant date.

Accrued Research and Development Costs

Research and development costs are expensed as incurred. Clinical development costs compose a significant component of research and development costs. The Company has a history of contracting with third parties that perform various clinical trial activities on its behalf. Service agreements with contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”) are recognized as the services are incurred. The Company accrues for expenses resulting from obligations under agreements with its third parties for which the timing of payments does not match the periods over which the materials or services are provided to the Company. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs, CMOs and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. The Company makes judgements and estimates in determining the accrual balance in each reporting period.

In the event advance payments are made to a CRO, CMO or other outside service provider, the payments are recorded within prepaid expenses and other current assets and subsequently recognized as research and development expense when the associated services have been performed. As actual costs become known, the Company adjusts its liabilities and assets. Inputs, such as the extent of services received and the duration of services to be performed, may vary from the Company’s estimates, which will result in adjustments to research and development expense in future periods. Changes in these estimates that result in material changes to the Company’s accruals could materially affect the Company’s results of operations. The Company’s historical estimates have not been materially different from actual amounts recorded.

Preferred Stock

The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred stock subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred stock (including preferred stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred stock is classified as stockholders’ equity.

Recent Accounting Standards Adopted

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for allocating income tax expense or benefit for the year to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to stockholders’ equity; the methodology for calculating income tax expense or benefit in an interim period; and recognition of deferred tax liabilities outside basis difference. This ASU became effective for the Company on January 1, 2021; however, the adoption of this new standard did not have a material impact on its condensed consolidated financial statements and related disclosures.

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NOTE 3. CASH EQUIVALENTS AND INVESTMENTS

Cash equivalents consist of the following (in thousands):